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Child custody issues as they relate to your taxes

Knee-deep in tax season, many separated and recently divorced California couples are struggling with the added complication that separation has on finances and their tax returns. Property division, alimony, child custody and child support all potentially affect one's tax filing. For those California residents wondering whether to claim any or all of their children on the tax return post-divorce, consider an expert's advice.

As many California parents know, one federal tax kindness is the ability to claim a deduction for one's children. The act reduces the individual's income total, potentially dropping him into a lower tax bracket. Such a perk often results in less tax liability, lower tax percentages and much saving. This is why one woman is trying to determine how to claim such deductions for her children.

The woman recently divorced from her husband. Last year, the then-wife signed a 8332 IRS form, giving her then-husband the option to claim their youngest son on his tax return. Since that time, the couple has divorced. The woman now has full custody of the children who only see their dad occasionally. Unfortunately, upon completing her tax return online, she was informed that the child exemption had already been claimed.

An expert advises her to locate the 8332 form to determine whether she permitted for the deduction to her husband for only that year. If so, she should be able to claim the child, so long as there is no divorce agreement that says otherwise. Thus, she may have to merely paper file instead of completing the process online, which may not be updated to current deduction options. If she permitted for the deduction in the years following, she may have to complete a revocation form.

Divorce is truly a difficult and often complicated process to undergo. As if questions of child custody and property division are not enough, a separating couple must also consider how such issues will impact their future finances. Inserting a statement about child dependency tax deductions in one's divorce decree could also certainly save a lot of trouble in the long run.

Source: The Sacramento Bee, "Ask the experts: California won't garnish social security income," March 20, 2013

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John T. Chamberlin, Attorney at Law
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